But beware: THE surefire, infallible, foolproof system to make the right choice in equities does not exist! There is more than one way to find good investment opportunities.
It is said that managers who spend a lot of time and effort identifying the best assets to invest in are managing their fund actively. The funds managed that way are “active funds”.
If we want to measure the performance of the fund (and to assess whether the manager has done a good job), we compare it to the stock market index calculated regularly for the particular market in which the fund invests. This index measures the performance of the overall market.
The goal of any manager is to achieve a performance superior to that index, to “beat the market”.
But it turned out that this is an extremely difficult exercise and that only a minority of managers delivers a performance that is better than the overall market over a period of several years. Each company “lives”, develops over the years, has its ups and downs, and we are never safe from surprises, be they positive or negative. The scandal over fraudulent manipulation of polluting emissions of its cars by the German manufacturer Volkswagen that led to a dramatic drop in the company’s share price is a telling example.
